Written by Jess Edroff & Anthony Boni
Ward Goodman
May 2, 2025
ICAEW recently hosted a live seminar at Chartered Accountants’ Hall in London, bringing together experts from HMRC, leading software providers, and accounting professionals to discuss the upcoming rollout of Making Tax Digital (MTD) for Income Tax. Here’s a summary of the key insights from the day.
Covered during the day:
HMRC
The day began with a talk from Craig Ogilvie, Director of Making Tax Digital (MTD) at HMRC. He gave an overview of the MTD timeline and stressed the importance of clients signing up early, ahead of the April 2026 deadline. Over 700,000 sole traders and landlords whose combined income from self-employment and property exceeds £50,000 will be mandated into MTD in 2026. This threshold will reduce to £30,000 in 2027 and £20,000 in 2028.
Craig outlined several benefits of starting early and joining the testing phase, including better real-time tracking of finances and more proactive tax planning, helping to avoid the January 31st rush.
Key points clarified:
- Once enrolled in MTD, you are committed for at least three years. You would need to fall below the income threshold for three consecutive years to exit the regime.
- A separate submission will be required for each source of sole trade income, but property income may be grouped into a single submission if appropriate.
- HMRC will issue an estimated tax liability after each quarterly update is filed. This is not payable and the usual payment deadline remains in place, it is to provide the taxpayer with an estimate for their information only.
- Individuals who previously submitted their tax returns via the HMRC online portal will no longer be able to do so once signed up to MTD; filing must be done through commercial software.
Software providers
We spoke to multiple accounting software providers, including Xero, Sage, and Dext, to explore their MTD solutions. Each provider demonstrated how quarterly updates can be prepared and submitted using their platforms, giving us a better understanding of the options available.
Panel
The day concluded with a panel discussion featuring Rebecca Benneyworth MBE (lecturer, writer, and tax consultant), Manoj Varsani (CEO of Hammock, accounting software for landlords), and ICAEW practice member Aaron Patrick. The panel was hosted by Lindsey Wicks, Senior Technical Manager of Tax Policy at ICAEW. They discussed how MTD will impact accounting firms and highlighted the need for firms to build closer client relationships through regular contact.
Key takeaways:
- Individuals need to prepare for MTD – it is approaching quickly.
- Those not currently using accounting software will need to adopt a digital solution and should speak to us for advice on the best options.
- Feedback from software test groups has been largely positive.
- Late payment penalties are increasing, making it even more important to stay on top of filings and payments.
Questions:
- Filing deadline for submissions: 7th of the month following the quarter-end.
- Quarter-end dates: Default quarter-ends are 5th July, 5th October, 5th January, and 5th April. An election can be made to move to calendar month-ends (30th June, 30th September, 31st December, and 31st March).
- Submissions: These are cumulative – any errors can be corrected in the next quarter’s update.
- Will HMRC offer a free portal? No, all submissions must be made through third-party software.
Late payment penalties
From 2026, stricter penalties will apply for late tax payments under MTD for Income Tax. If a balancing payment, or an amount due after an amendment or assessment, is not paid within 15 days of the due date, a first penalty of 3% of the unpaid amount will be charged. If payment remains outstanding after 30 days, an additional 3% penalty will apply.
Beyond this, a daily penalty equivalent to 10% annually of the outstanding balance will accrue until the debt is cleared. These charges are in addition to the standard interest that HMRC applies to overdue tax.
Importantly, if a Time to Pay arrangement is agreed with HMRC before the relevant deadlines, these penalties can usually be avoided.
Please note: The previous late payment penalty rules will continue to apply for tax liabilities outside of MTD (for earlier tax years).
Need help preparing for MTD? Our expert tax team can guide you through the transition. Get in touch today or learn more about Making Tax Digital.
